What is Public Service Loan Forgiveness?
Public Service Loan Forgiveness (PSLF) is a federal program that pays off student loans for people who work in public service.
Under this program, public service employees will get their federal loans forgiven after 120 qualifying payments, which usually takes about 10 years.
Here, we’ll answer some questions that you may have.
Am I eligible for PSLF?
To be eligible for PSLF, you must meet three criteria:
- Make 120 qualifying payments (usually this takes about 10 years) on a Direct loan
- Be on a qualifying repayment plan, and
- Work full-time for a qualifying employer.
Let’s break all of that down a bit further.
What are qualifying payments?
For your monthly payments to qualify, they must have:
- Been made after October 1, 2007.
- Be for the total amount listed on your bill, and
- Been submitted on time.
If you’re a little late, that’s okay—“on time” means no more than 15 days after the due date. But be careful: you don’t want to lose eligibility by getting your payment in late. Even one late payment could derail your eligibility.
Payments also must be made while you are working full-time for a qualifying employer. If you spend time working for a non-qualifying employer or are unemployed for some time during that ten-year period, the payments made during that time period will not count toward your 120 qualifying payments.
However, if you go back to working for a qualifying employer, your payments can qualify again. That's why making 120 qualifying payments can take more than 10 years for some people.
What is a qualifying repayment plan?
To participate in PSLF, you must be on an income-driven repayment plan, such as:
- Pay as You Earn (PAYE)
- Revised Pay as You Earn (REPAYE)
- Income-Contingent Repayment, or
- Income-Based Repayment
Any payments you make under traditional or extended repayment plans do not count toward the 120 payments required for PSLF.
The 10-year Standard Repayment Plan also technically qualifies. However, under this plan, you'll pay off your loan within 10 years. Your loan forgiveness will kick in right about the time you write your last monthly payment check.
So if you want to take advantage of PSLF, be sure to get on an income-driven payment plan as soon as possible.
Which loans are eligible?
Only Direct loans that are not in default are eligible for PSLF.
If you have other types of federal loans, you may still be able to have your loans forgiven. If you consolidate them through a Direct Consolidation Loan, that consolidated loan would be eligible for PSLF.
It's important to note, though, that if you've been making qualifying payments on your Direct loans, and then you consolidate them with other types of federal loans, the qualifying payments you made on those loans before you consolidated won't count.
So if you've already been making qualifying payments for some Direct loans, it may be a good idea to consolidate only your non-Direct loans, and avoid consolidating existing Direct loans you've been making qualifying payments on.
What is a qualifying employer?
The particular position you hold within an organization is irrelevant when applying for PSLF. The type of employer determines your eligibility.
The following types of employers qualify:
- Government organizations (local, state, federal, or tribal)
- 501(c)(3) non-profit organizations
- Non-profit organizations that do not have 501(c)(3) status but provide public services, such as public education or public health
- Volunteer organizations, like Peace Corps and Americorps
What is full-time employment?
You are employed full time if you work at least 30 hours per week or the number of hours considered full time by your employer, whichever is greater.
Two combined qualifying part-time positions can satisfy the full-time requirement.
How much could I have forgiven?
There is no cap on PSLF. The full remaining balance of your Direct loans will be forgiven after you make 120 qualifying payments.
What are the risks?
PSLF began in 2007, so the first group of eligible borrowers recently began submitting their final applications for forgiveness. Unfortunately, some borrowers counted on PSLF only to find that they’d been making their payments under the wrong plan the whole time.
Remember: PSLF only applies to borrowers who have been paying on an income-driven repayment plan for 10 years. If you’re paying your loans on a traditional or extended repayment plan, your loans will not be forgiven under PSLF.
How do I sign up for PSLF?
The federal government recommends that you submit an employment certification form as soon as possible when you start a position with a qualified employer and any time you switch employers, so that you don’t spend years making payments only to find they didn’t qualify for PSLF.
If you want to make absolutely sure every payment counts, submit your certification form annually so that you’ll know right away if anything changes.
How do I apply for forgiveness?
Your loans will not automatically be forgiven when you submit your 120th qualified payment. You must submit an application, and you must still be working for a qualifying employer when your loans are forgiven.
If you don’t qualify for Public Service Loan Forgiveness, you can still reduce what you pay over the life of your loans. Learn how you can lower your student loan payments.